Growing With Municipal Recycling

Municipal solid waste management plans designed to keep postconsumer recyclables out of the waste stream offer tremendous opportunities for scrap processors that are willing to invest time and energy into entering the market.

When people think of the traditional scrap industry in America, they often picture the heritage of many of today's scrap companies: a bearded man on the back of a wagon filled with iron, paper, or a mixture of materials. It is a proud heritage, but not one that restricts, confines, or keeps the industry from realizing new opportunities. In fact, the picture represents the only true tradition within the scrap industry, the tradition of responding to new opportunities.

There have been numerous social and economic changes in recent years that have created a new set of opportunities for the public concern for our environment and willingness by taxpayers and public policy makers to spend money to protect it. This change was first evidenced by 1970's Earth Day and has had a rising influence on public policy through the 20-plus years since. It seems clear that dm is a movement that will only grow and, thus, one whose opportunities our industry can respond to.

One such opportunity was presented to my family's company, Empire Recycling Corp., in 1982, when New York state passed a "bottle bill" with the stated goal of environmental improvement. The company's first reaction was fear that our existing can and glass business would be lost to outside interests. However, shortly thereafter, we realized that the law offered opportunities. Thus, we created RRT Empire Returns Corp.--a wholly owned subsidiary of Resource Recycling Technologies Inc. (RRT)--which in the last seven years has collected, processed, and marketed more than 300,000 tons of glass, plastics, and metals and has made a profit doing so.

The other fundamental change that can work in favor of the scrap industry has been the rising costs of waste disposal. The economics of landfilling and incineration have made large-scale municipal recycling economically attractive. And who better to handle such programs than the most experienced and successful recyclers currently operating in America: the scrap industry.

Figuring on New Formulas

Recycling by the scrap industry traditionally has been based upon the supply-and-demand fundamentals of commodities. Municipal recycling, on the other hand, is a solid waste management tool, a service in competition with landfilling and incineration. Thus, its margins are more dependent on waste disposal costs than on commodity values. This difference provides excellent opportunities for the scrap industry.

Pricing of recycling operations based upon service instead of commodity values can be pegged to landfill disposal fees. Since landfill capacities are shrinking, and landfill costs--especially in the East--continue to rise, municipalities will pay for recycling services that compete favorably in the long run with landfilling. Although commodity market prices can play a role in a municipality's decision to recycle, they are not the deciding factor. instead, it is the efficiency, stability, and level of service offered that are most important.

Operations at RRT's plant in Syracuse, N.Y., operated by RRT Empire, offer an example of how municipal recycling economics can work. The early September price of No. 7 old newspaper on the East Coast was about $15 per ton FOB Port of Newark, N.J. Meanwhile, the freight from Syracuse to Newark is approximately $26 per ton, and RRT Empire's processing and overhead costs are more than $15 per ton. The traditional industry practice in this situation would be to find another market or stop processing old newspapers until supplies dried up and prices rose.

But this is not the route RRT Empire has taken. Municipalities continue to collect newspaper and haul it to our Syracuse plant, Paying us more dm $30 per ton. It is a win-win situation: We are satisfied with our profits and the municipalities are satisfied with the fact that they get rid of their old newspaper (and metal cans, plastics, and glass) at a price less than their alternative disposal costs of nearly $60 per ton.

The thrust of the new recycling economics is that a municipality will pay up to its alternative disposal costs for recycling services. And as alternative disposal costs rise, so do the potential profit margins for recyclers.

Moving Into Municipal Recycling

The opportunities for the scrap industry in the new recycling service industry are both attractive and available. But how can scrap industry managers intelligently move their companies toward these new opportunities?

The first step should be to plan an incremental approach based on the firm's history, operations experience, strategic goals, and knowledge of local communities. The question of whether a scrap company should develop a full-scale intermediate processing center designed to convert commingled postconsumer scrap materials into marketable products is a complex one. There are opportunities for scrap companies at every point on the municipal recycling spectrum. Prudent scrap managers can move incrementally along that spectrum to position their companies to capture profitable business.

To keep their municipal recycling plans up-to-date, scrap companies must keep abreast of enacted and pending legislation within the municipalities and states m winch they operate. The easiest and most inexpensive resources for such information are local newspapers, recycling trade magazines, and trade associations.

Making the Connections

There is no substitute for management knowledge. Therefore, the next step is to acquire as much knowledge as possible about the players and politics of recycling in the municipalities that could be serviced. These players can include the waste haulers, municipal managers, community groups, and politicians who are responsible for or have an interest in management of the waste stream in their community.

To attain that knowledge, some basic questions--market research tools--must be answered. What are the community's current plans? What can the community afford? What does the local political climate dictate? Who are the municipal solid waste decision makers? The answers to these questions can reveal who the real customer is and what niches are available for your company to serve.

It has often been RRT's strategy to establish a partnership with a local scrap processor or waste hauler in order to take advantage of knowledge about local market conditions. Only by determining exactly what the municipality needs and wants can you make the moves necessary to capitalize on its needs.

In order to establish standards and procedures for your operations, you will need to know what is currently working out in the real world. Therefore, scrap companies considering participation in municipal recycling should be aware of what the municipal recycling industry is doing.

One way to broaden this awareness is selected attendance at municipal recycling and solid waste trade shows, which should reveal who is doing what in the industry. Attempt to identify the best in a variety of operations ranging from high-tech to low-tech systems, from commingled to source-separated material handling, from labor-intensive to capital-intensive techniques. After you have determined which are the best operations in specific niches, get to know their operations thoroughly. Use them as benchmarks, establish their standards of throughput or residue as your own, and strive to achieve them.

Building on Private-Sector Background

Once you're ready to make your move into municipal recycling, inform municipalities of the solutions private-sector recyclers can offer. Sell your local experience, cost effectiveness, and the management ease of private-sector solutions to municipal solid waste decision makers.

One successful operation is worth a thousand words, so slowly begin to solicit small quantities of nontraditional scrap materials from your community waste stream. This will help you acquire practical knowledge about transportation, processing, storage, and marketing of these recyclables. Increase the volume of throughput only as you can efficiently and profitably process and market the materials. Consider hiring technical consultants for specific expertise. For instance, sophisticated municipal recycling facilities generally require sophisticated engineering solutions, and consultants can be excellent resources for such knowledge.

If you can provide a successful service to a municipality and make a profit at it, you have made the strongest possible presentation concerning the advantages of private-sector recycling.

If you decide to become part of the municipal recycling process and attempt to make this business yours, you should have a clear picture of what the community is attempting to accomplish as well as where your firm fits into the final scheme. Your involvement should begin with the earliest stages of program planning.

Municipal solid waste management plans designed to keep postconsumer recyclables out of the waste stream offer tremendous opportunities for scrap processors that are willing to invest time and energy into entering the market.

When people think of the traditional scrap industry in America, they often picture the heritage of many of today's scrap companies: a bearded man on the back of a wagon filled with iron, paper, or a mixture of materials. It is a proud heritage, but not one that restricts, confines, or keeps the industry from realizing new opportunities. In fact, the picture represents the only true tradition within the scrap industry, the tradition of responding to new opportunities.

There have been numerous social and economic changes in recent years that have created a new set of opportunities for the public concern for our environment and willingness by taxpayers and public policy makers to spend money to protect it. This change was first evidenced by 1970's Earth Day and has had a rising influence on public policy through the 20-plus years since. It seems clear that dm is a movement that will only grow and, thus, one whose opportunities our industry can respond to.

One such opportunity was presented to my family's company, Empire Recycling Corp., in 1982, when New York state passed a "bottle bill" with the stated goal of environmental improvement. The company's first reaction was fear that our existing can and glass business would be lost to outside interests. However, shortly thereafter, we realized that the law offered opportunities. Thus, we created RRT Empire Returns Corp.--a wholly owned subsidiary of Resource Recycling Technologies Inc. (RRT)--which in the last seven years has collected, processed, and marketed more than 300,000 tons of glass, plastics, and metals and has made a profit doing so.

The other fundamental change that can work in favor of the scrap industry has been the rising costs of waste disposal. The economics of landfilling and incineration have made large-scale municipal recycling economically attractive. And who better to handle such programs than the most experienced and successful recyclers currently operating in America: the scrap industry.

Figuring on New Formulas

Recycling by the scrap industry traditionally has been based upon the supply-and-demand fundamentals of commodities. Municipal recycling, on the other hand, is a solid waste management tool, a service in competition with landfilling and incineration. Thus, its margins are more dependent on waste disposal costs than on commodity values. This difference provides excellent opportunities for the scrap industry.

Pricing of recycling operations based upon service instead of commodity values can be pegged to landfill disposal fees. Since landfill capacities are shrinking, and landfill costs--especially in the East--continue to rise, municipalities will pay for recycling services that compete favorably in the long run with landfilling. Although commodity market prices can play a role in a municipality's decision to recycle, they are not the deciding factor. instead, it is the efficiency, stability, and level of service offered that are most important.

Operations at RRT's plant in Syracuse, N.Y., operated by RRT Empire, offer an example of how municipal recycling economics can work. The early September price of No. 7 old newspaper on the East Coast was about $15 per ton FOB Port of Newark, N.J. Meanwhile, the freight from Syracuse to Newark is approximately $26 per ton, and RRT Empire's processing and overhead costs are more than $15 per ton. The traditional industry practice in this situation would be to find another market or stop processing old newspapers until supplies dried up and prices rose.

But this is not the route RRT Empire has taken. Municipalities continue to collect newspaper and haul it to our Syracuse plant, Paying us more dm $30 per ton. It is a win-win situation: We are satisfied with our profits and the municipalities are satisfied with the fact that they get rid of their old newspaper (and metal cans, plastics, and glass) at a price less than their alternative disposal costs of nearly $60 per ton.

The thrust of the new recycling economics is that a municipality will pay up to its alternative disposal costs for recycling services. And as alternative disposal costs rise, so do the potential profit margins for recyclers.

Moving Into Municipal Recycling

The opportunities for the scrap industry in the new recycling service industry are both attractive and available. But how can scrap industry managers intelligently move their companies toward these new opportunities?

The first step should be to plan an incremental approach based on the firm's history, operations experience, strategic goals, and knowledge of local communities. The question of whether a scrap company should develop a full-scale intermediate processing center designed to convert commingled postconsumer scrap materials into marketable products is a complex one. There are opportunities for scrap companies at every point on the municipal recycling spectrum. Prudent scrap managers can move incrementally along that spectrum to position their companies to capture profitable business.

To keep their municipal recycling plans up-to-date, scrap companies must keep abreast of enacted and pending legislation within the municipalities and states m winch they operate. The easiest and most inexpensive resources for such information are local newspapers, recycling trade magazines, and trade associations.

Making the Connections

There is no substitute for management knowledge. Therefore, the next step is to acquire as much knowledge as possible about the players and politics of recycling in the municipalities that could be serviced. These players can include the waste haulers, municipal managers, community groups, and politicians who are responsible for or have an interest in management of the waste stream in their community.

To attain that knowledge, some basic questions--market research tools--must be answered. What are the community's current plans? What can the community afford? What does the local political climate dictate? Who are the municipal solid waste decision makers? The answers to these questions can reveal who the real customer is and what niches are available for your company to serve.

It has often been RRT's strategy to establish a partnership with a local scrap processor or waste hauler in order to take advantage of knowledge about local market conditions. Only by determining exactly what the municipality needs and wants can you make the moves necessary to capitalize on its needs.

In order to establish standards and procedures for your operations, you will need to know what is currently working out in the real world. Therefore, scrap companies considering participation in municipal recycling should be aware of what the municipal recycling industry is doing.

One way to broaden this awareness is selected attendance at municipal recycling and solid waste trade shows, which should reveal who is doing what in the industry. Attempt to identify the best in a variety of operations ranging from high-tech to low-tech systems, from commingled to source-separated material handling, from labor-intensive to capital-intensive techniques. After you have determined which are the best operations in specific niches, get to know their operations thoroughly. Use them as benchmarks, establish their standards of throughput or residue as your own, and strive to achieve them.

Building on Private-Sector Background

Once you're ready to make your move into municipal recycling, inform municipalities of the solutions private-sector recyclers can offer. Sell your local experience, cost effectiveness, and the management ease of private-sector solutions to municipal solid waste decision makers.

One successful operation is worth a thousand words, so slowly begin to solicit small quantities of nontraditional scrap materials from your community waste stream. This will help you acquire practical knowledge about transportation, processing, storage, and marketing of these recyclables. Increase the volume of throughput only as you can efficiently and profitably process and market the materials. Consider hiring technical consultants for specific expertise. For instance, sophisticated municipal recycling facilities generally require sophisticated engineering solutions, and consultants can be excellent resources for such knowledge.

If you can provide a successful service to a municipality and make a profit at it, you have made the strongest possible presentation concerning the advantages of private-sector recycling.

If you decide to become part of the municipal recycling process and attempt to make this business yours, you should have a clear picture of what the community is attempting to accomplish as well as where your firm fits into the final scheme. Your involvement should begin with the earliest stages of program planning.